VVIPs grounded: India set to cancel chopper deal

The Indian Air Force faces a dilemma over how it will fly VVIPs to forward areas from next year, with the defence ministry issuing a final showcause notice to UK-based AgustaWestland for cancelling the controversial Rs 3,727-crore contract to supply 12 choppers to IAF.

The IAF’s existing VVIP fleet consisting of Russian-made Mi-8 choppers of 1970s vintage will not be airworthy beyond 2014.

The helicopter firm has three weeks to respond. The move comes on the heels of AgustaWestland initiating arbitration proceedings against the defence ministry as it had not responded to the firm’s requests for discussions.

India will invoke the integrity pact to scrap the deal in which the firm allegedly paid middlemen more than Rs 375 crore in bribes.

Under the agreement - a standard clause in all contracts worth more than Rs 100 crore - the bidder commits that bribes will not be offered. Any violation empowers the government to cancel the contract and recover money already paid.

This will be the first instance of a contract being cancelled after deliveries had begun - raising a question mark on the fate of three AW-101 choppers already parked in IAF hangars. The choppers could be returned.

India has already paid more than Rs 1,300 crore to AgustaWestland. The contract was suspended in February following the kickback scandal, involving a former air chief and several middlemen.

As reported by HT on February 16, the IAF is considering going back to Russia to acquire new VVIP fleet to replace its ageing Mi-8 choppers.

A fresh global tender may not be floated as this could delay the process by seven to eight years.

All military purchases have to be made through competitive bidding. However, switching to a new vendor, Russia in this case, would not require tendering as this would be considered a “follow-on” order since India has already booked 139 Mi-17 V5 choppers. That order may be expanded and the new choppers could be upgraded for VVIP use.

AgustaWestland, a subsidiary of Italian defence group Finmeccanica, now faces the scary prospect of being blacklisted for up to 10 years. It was angling for lucrative defence contracts worth more than Rs 50,000 crore in the Indian market.